How Much Does a 401(k) Contribution Reduce Your Paycheck?

This article is general information, not tax or financial advice. Tax rules change, individual situations vary, and every figure here is an estimate. Confirm specifics with a qualified tax professional before making money decisions.

It costs less than it saves you

When you put a dollar into a traditional 401(k), your paycheck does not drop by a full dollar. It usually drops by somewhere around 73 to 78 cents.

A pre-tax contribution comes out of your wages before income tax is calculated, so you skip the income tax you would have paid on that money. The gap between the dollar you contributed and the smaller hit to your check is the tax you no longer owe right now.

Here is the rule you can carry around in your head: your paycheck reduction equals your contribution times (1 minus your marginal income tax rate). Contribute $100 in the 22% bracket and your take-home falls by about $78, not $100. That missing $22 went into your retirement account instead of to the IRS.

That is the headline. The rest of this piece is the math behind it, the one catch most calculators skip, and how Roth changes the picture.

Why your paycheck drops less than your contribution

A traditional 401(k) deferral is “pre-tax,” and that phrase is doing all the work.

Your gross pay gets reduced by the contribution first. Then federal income tax (and usually state income tax) is figured on the smaller number. Lower taxable wages mean less income tax withheld, so the actual cash leaving your check is the contribution minus the tax you just avoided.

It works like a discount on saving. You wanted to set aside $100. Because the government does not tax that $100 today, the real cost to your wallet is only what was left after the tax break, roughly $78 in the 22% bracket. The IRS effectively chipped in the rest, with the catch that you will pay income tax later when you withdraw the money in retirement.

This is also why a 401(k) is described as lowering your taxable income. It does not lower your tax rate or move you into a friendlier bracket by magic. It shrinks the amount of income that gets taxed in the first place.

The catch most calculators miss: 401(k) money still pays FICA

This is the part that trips people up, and it is the reason your bracket, not your bracket plus 7.65%, is the right multiplier.

A traditional 401(k) contribution shields you from income tax. It does not shield you from FICA, the payroll tax that funds Social Security and Medicare. The IRS treats elective deferrals as wages for Social Security and Medicare purposes even though they are excluded from income-tax wages.

You can see this on your own W-2. Box 1 (income-tax wages) is reduced by your pre-tax deferrals, which is why it often comes in lower than the other boxes. Box 3 and Box 5 (Social Security and Medicare wages) include those deferrals, because FICA was withheld on them anyway.

FICA is 6.2% for Social Security plus 1.45% for Medicare, or 7.65% combined. That comes out of the contribution either way, so it never figures into the savings. When you calculate how much your paycheck shrinks, only the income tax you skip reduces the hit. The payroll tax is already gone.

Per-bracket reduction table (2026 federal brackets)

The cleanest way to find your own number is to look up your marginal federal bracket and read across. The table below shows what happens to your take-home for every $100 of pre-tax contribution, counting federal income tax only.

| Federal marginal bracket | Income tax saved per $100 | Take-home pay reduction per $100 | |---|---|---| | 10% | $10 | $90 | | 12% | $12 | $88 | | 22% | $22 | $78 | | 24% | $24 | $76 | | 32% | $32 | $68 | | 35% | $35 | $65 | | 37% | $37 | $63 |

State income tax shifts these numbers further in your favor, since a traditional deferral usually lowers state taxable income too. Live in a no-income-tax state like Texas or Florida and the federal column is the whole story. Live in a higher-tax state and you save more.

A quick example: at the 22% federal bracket with a 5% state income tax, you save $22 plus $5 per $100, so your take-home drops by about $73 instead of $78. That lands right in the 73-to-78-cent range from the top of this article, which is where a typical middle-income worker in a moderate-tax state ends up.

Traditional vs Roth: the paycheck difference

Everything above describes a traditional, pre-tax contribution. A Roth 401(k) works the other way, and the paycheck math flips with it.

A Roth contribution is made with after-tax money. There is no income tax break today, so your take-home drops by the full amount you contribute. Put $100 into a Roth 401(k) and your check falls by the full $100, not $78. The payoff comes later: qualified Roth withdrawals in retirement are tax-free.

FICA treats both types identically. Roth and traditional deferrals both pay the 7.65% payroll tax now, so that part of your check looks the same either way.

So the trade is straightforward. Traditional gives you a smaller paycheck hit now and a tax bill later. Roth takes a bigger bite now and hands you tax-free income in retirement. Neither is automatically better. It depends on whether you expect your tax rate to be higher now or later, and that is a personal call worth running both ways. (If withholding mechanics interest you, our piece on why your bonus gets taxed so much covers the same prepayment-versus-real-tax distinction.)

2026 contribution limits and what they mean for your paycheck

The IRS raised the limits for 2026, so here is what you can defer and roughly what it costs per paycheck.

Employee elective deferral: $24,500, up from $23,500 in 2025.
Catch-up (age 50 and older): an extra $8,000, for $32,500 total.
Super catch-up (ages 60 to 63): an extra $11,250, for $35,750 total.
Combined employee plus employer limit: $72,000.

There is also a new 2026 rule worth flagging. If your prior-year FICA wages were over $150,000, your catch-up contributions must be made as Roth (after-tax). For high earners, that means the catch-up portion now reduces take-home dollar for dollar instead of getting the pre-tax discount.

What does maxing out actually cost? Defer the full $24,500 as traditional in the 22% bracket and your take-home falls by roughly $19,000 across the year, not $24,500, because you skip about $5,400 in federal income tax. FICA still comes out of the whole $24,500 either way. The exact figure depends on your bracket and state, which is the part worth modeling rather than guessing.

Model your exact paycheck impact

The bracket table gets you close, but your real number depends on your state, your filing status, and the rest of your deductions stacking together. That is fiddly to do by hand.

This is what the Salary Calculator app (Stub44) is built for. It supports both a traditional 401(k) and a Roth 401(k) as distinct deduction types, and it runs the full federal, state, and FICA math across all 50 states plus DC. Enter your salary, add a traditional 401(k) deduction, pick your state and filing status, and read your net pay.

To see the traditional-versus-Roth difference for yourself, set up two saved profiles: one with a traditional deferral and one with a Roth deferral of the same amount. Compare the net income side by side and the real take-home delta is right there, no spreadsheet required.

When you are ready to run your own numbers, you can download Salary Calculator and test a contribution against your actual paycheck in about a minute.

Frequently Asked Questions

How much does a $100 401(k) contribution reduce my paycheck?

In the 22% federal bracket, about $78. The other $22 is income tax you don’t pay. State income tax can push the reduction a bit lower.

Does a 401(k) contribution lower my taxable income?

Yes. Traditional (pre-tax) contributions reduce your federal and usually your state taxable income. Roth contributions do not, because they go in after tax.

Yes. Both traditional and Roth 401(k) deferrals are subject to FICA, which is 7.65%. The contribution only shields income tax, not payroll tax.

What’s the difference in paycheck impact between traditional and Roth 401(k)?

A traditional contribution cuts take-home by less than the contribution, because you keep the income tax you would have paid. A Roth contribution reduces take-home dollar for dollar, since it’s after tax.

What is the 401(k) contribution limit for 2026?

$24,500 for employee deferrals, plus an $8,000 catch-up at age 50 or older, or $11,250 at ages 60 to 63.

How do I estimate my own 401(k) paycheck impact?

Multiply your contribution by (1 minus your marginal income tax rate). Or enter a traditional 401(k) deduction in Salary Calculator with your state and filing status to see the exact net change.

Why is my W-2 Box 1 lower than Box 3 and Box 5?

Box 1 excludes your pre-tax 401(k) deferrals, since they aren’t income-taxable now. Box 3 and Box 5 (Social Security and Medicare wages) include them, because deferrals still pay FICA.

Will maxing out my 401(k) in 2026 cut my take-home by $24,500?

No. The take-home reduction is $24,500 minus the income tax you avoid at your marginal rate, typically closer to $18,000 to $19,000 for a mid-bracket worker. FICA is still withheld on the full amount.